IRDAI vide Order bearing reference number: IRDAl/E&C/ORD/MISC/103/07/2024 dated July 15, 2024, issued an Order in the matter of M/s. Bajaj Finance Limited ( “ Corporate Agent ”) with respect to the Show Cause Notice dated March 14, 2024, issued by the Authority for the violation of the provisions of IRDAI (Registration of Corporate Agents) Regulations, 2015.
The observation/ issues raised by the Authority and decisions on these observations are summarized hereunder for reference:
Charge No
Violation
Observations of the Authority
Decision of the Authority
1 and 2
Violation of Regulation 31(3) and 23(g) of IRDAI (Registration of Corporate Agents) Regulations, 2015
Reg. 31(3) –
Maintenance of Books of account, records, etc-
Every Insurer who is engaging the services of a corporate agent shall file with the Authority a certificate, separately for all such corporate agents, in the format given in the Schedule VIA to be signed by the CEO and CFO. A similar certificate from the Principal Officer and CFO (or its equivalent) of the corporate agent specifying the commission/remuneration received from the insurer shall be filed with the Authority as given in Schedule VIB
Reg. 23(g)
Arrangements with Insurers for distribution of products
“No insurer shall pay and no corporate agent shall receive any signing fee or any other charges by whatever name called, except those permitted by the Authority under relevant regulations, for becoming its corporate agent.
The Authority observed the figures mentioned in the Reports submitted by the Corporate Agent did not match with the Books of accounts.
The Authority observed that the agreement filed post issuance of Show Cause Notice was not dated correctly and its Stamp Paper is dated January 09, 2017. Further, the Agreement submitted does not the details of the remuneration payable to the Corporate Agent by the Bajaj Allianz General Insurance Company Limited.
The amount of interest/subvention charges, as per the books of accounts of the Corporate Agent for two years were Rs. 11.20 Crore whereas, as per the submission made by the Corporate Agent, post personal hearing, the charges were Rs. 10.01 crore. Thus, the Corporate Agent failed provide reasons for the difference of Rs. 1.19 Crore.
The Authority exercised the power vested under Section 102(b) of the Insurance Act, 1938 levied a penalty of Rs. 1,00,00,000/- for the violations of Regulation 31(3) and 23(g) of IRDAI (Registration of Corporate Agents) Regulations, 2015.
The Authority under Section 14(2)(h) of IRDA Act, 1999 directed the Corporate Agents:
- To cause an audit of accounting procedures which shall be carried out by Chartered Accountant Firm (CA Firm).
- The Audit shall be completed within 180 days from the date of receipt of this Order.
- Basis the report, the Corporate shall take necessary remedial action and a file certificate regarding the accuracy of the Accounting Systems in compliance with Regulatory prescriptions.
3
Violation of Regulation 5(e) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance and insurance intermediaries) (Second Amendment) Regulations 2017 and 18(1) of IRDAI (Registration of Corporate Agents) Regulations, 2015
Reg. 5(e)
“The maximum commission or remuneration payable under general insurance (motor) products offered by general insurers is given in Schedule IV.”
And
Reg. 18(1)
“The payment of remuneration to or receipt of remuneration by a corporate agent shall be governed by the regulations notified in this behalf by the Authority from time to time.”
The Authority observed that the commission paid on package motor policies by Bajaj Allianz General Insurance Company Limited and TATA General Insurance was more than what was specified in the Regulations
The Authority has not pressed any charges on violations of Regulation 5(e) of IRDAI (Payment of Commission or Remuneration or Reward to Insurance and insurance intermediaries) (Second Amendment) Regulations 2017 and 18(1) of IRDAI (Registration of Corporate Agents) Regulations, 2015.
4, 5 & 8
Charge 4: Violation of Regulation 25 (2) (ix) and Para-I (4) of Schedule VII of Regulation 25(1) of IRDAI (Registration of Corporate Agents) Regulations, 2015
“ A corporate agent engaging a telemarketer shall enter into an agreement with the telemarketer and the agreement shall provide the details such as source of the database, duties and responsibilities, payment details, period of agreement, actions to be taken in case of violation of Act, regulations, guidelines, circulars, directions issued by the Authority, Code of Conduct of Authorised Verifiers. The agreements shall be made available to the Authority or any person authorized by the Authority for verification as and when required.”
Charge No. 5 – Violations of Regulation 30(ii) of IRDAI (Registration of Corporate Agents) Regulations, 2015
Reg. 30(ii)
“A Corporate Agent shall maintain the following records including in electronic form and shall be made as and when required by the Authority –
(ii) Copy of the proposal form duly signed by the client and submitted to the insurer with ACR signed by the specified person of Corporate Agent
Charge No. 8 – Violation of Regulation 8(1) of IRDA (Protection of Policyholders’ interest) Regulation 2017 and also violation of sub-clause 3(b), 3(d) of Clause I of Schedule III to be read with Regulation 26 of IRDAI (Corporate Agents) Regulations, 2015
Reg. 8(1)
“Except in case of a marine insurance cover, or such other covers approved by the Authority exempting usage of proposal form, a proposal for grant of insurance cover, either for life insurance business or for general insurance business or for health insurance business, must be evidenced by a document in written or electronic or any other format as approved by the Authority. It is the duty of the insurer to furnish to the insured, free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal submitted by the Insured.”
The Authority observed that the Agreements entered into by the Corporate Agent with the Telemarketers did not incorporate the stipulated clauses related to the following:
- maintenance/preserving of recordings of all the calls,
- maintenance of records of authorised verifiers including their training & assessment particulars
- availability of the records for inspection by the Authority
- action to be taken in case of violation of act, regulations, code of conduct of authorised verifier issued by the Authority.
The Authority observed that the Corporate Agent has not maintained the copies of proposal forms/application forms duly signed by the client and has not submitted the same to the Insurer.
The Authority observed that the significant number of complaints wherein the policyholders were not aware of the insurance policies taken along with loan which was not disclosed by sales team at the time of loan. It was further observed that the complainants did not apply for any insurance cover but the same was provided to them without obtaining their consent which amount to mis-selling.
The Authority exercised the power vested under Section 102(b) of the Insurance Act, 1938 levied a penalty of Rs. 1,00,00,000/- for the violations of Regulation 25 (2) (ix) and Para-I (4) of Schedule VII of Regulation 25(1), Regulation 30(ii), sub-clause 3(b), 3(d) of Clause I of Schedule III to be read with Regulation 26 of IRDAI (Registration of Corporate Agents) Regulations, 2015.
The Authority under Section 14(2)(h) of IRDA Act, 1999 directed the Corporate Agents to file a certificate confirming the following:
- Due Adherence of Authority’s regulations/guidelines on the agreements.
- Maintenance/preserving of recordings of all the calls, maintenance of records of authroised verifiers including their training and assessment particulars.
- The data underlying the proposal forms and consents are retained in the systems of CA for further servicing to protect the interests of policyholders.
- Corporate Agent shall streamline its grievance redressal mechanism to protect the interests of policyholders and due adherence to grievance redressal systems with the extant instructions on code of conduct.
- The certificate shall be submitted to the Authority within 90 days from the date of this Order.
6
Violations of Regulation 6 (4) of IRDA (Protection of Policyholders’ interest) Regulation 2017, 30(ii) of IRDAI (Registration of Corporate Agents) Regulations, 2015 and Clause 6 of Guidelines on Corporate Governance.
Reg. 6(4)
“Where for any reason, the proposal and other connected papers are not filled in by the prospect, the insurer or the distribution channel shall explain the contents of the form, and a certificate shall be incorporated at the end of the proposal form from the prospect that the contents of the proposal form and connected documents have been fully explained to him and he has fully understood the significance of the proposed contract”
The Authority observed that in case if the member signed the form in vernacular language, there was no declaration signature on explaining the contents of the form to the member.
The Authority has not pressed any charges on violations of Regulation 6 (4) of IRDA (Protection of Policyholders’ interest) Regulation 2017, 30(ii) of IRDAI (Registration of Corporate Agents) Regulations, 2015 and Clause 6 of Guidelines on Corporate Governance.
7
Violation of sub-clause 2(e) under Clause I and sub-clause 3(b) under the Clause II of Schedule III to be read with Regulation 26 of IRDAI (Corporate Agents) Regulations, 2015
sub-clause 2(e) under Clause I
“Every Corporate Agent shall:
(e) give adequate pre-sales and post-sales advice to the insured in respect of the insurance product.
sub-clause 3(b) under the Clause II
“disseminate the requisite information in respect of insurance products offered for sale by the insurers with whom they have arrangement and take into account the needs of the prospect while recommending a specific insurance plan.
The Authority observed that the Corporate Agent was having tie-up with three life insurers but only one insurance product ‘Click to protect’ of HDFC Life Insurance Company have been offered. Further, the Corporate failed to advise the prospects on the available range of products of various insurers.
The Authority has not pressed any charges on violations of sub-clause 2(e) under Clause I and sub-clause 3(b) under the Clause II of Schedule III to be read with Regulation 26 of IRDAI (Corporate Agents) Regulations, 2015
The Authority has directed the Corporate Agent to:
1. Remit the penalty of Rs. 2,00,00,000/- (Rupees Two Crore only) within a period of 45 days from receipt of this Order.
2. An intimation for remittance may be sent to Shri T Venkateshwara Rao, General Manager (Enforcement & Compliance).
3. This Order shall be place before the Board at its next immediate meeting and the Corporate Agent shall provide the copy of the minutes of the said meeting.
4. If the Corporate Agent feels aggrieved by this Order, an appeal may be preferred to the Securities Appellate Tribunal, Mumbai as per the provisions of Section 110 of the Insurance Act, 1938.
A copy of the Order is attached for your ready reference.
Source category: IRDAI
Attachments
- /2024/413_Order_in_the_matter_of_Bajaj_finance_limited.pdf
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